Korea is home to a robust gray market, evident by the number of items listed on eBay of Korea Gmarket. On average, 8,000 items are listed per brand on Gmarket vs. just 500 items per brand on direct e-tailers Lotte, Galleria Mall, Shinsegae Mall and Hyundai Mall. The abundance of counterfeit goods has been prohibitive for e-commerce growth, as most shoppers prefer to buy goods at retail locations of reputable department stores to ensure authenticity. E-tailers are trying to change that.
In October, Gmarket created a special page for curated luxury products where customer service reps verify the authenticity of each item. Each product is assigned a QR code with information such as importer info and manufactured country. Sales increased by 26% within six months, demonstrating the market’s appetite for luxury e-commerce. Similarly, 11st created an “Italian Luxury Corner” with authenticity verification and two-year warrantyin 2012 and experienced a 400% increase in sales last year. Shingsae Mall, owned by the well-known department store, has introduced QR codes as well.
What are brands doing to stop sales of unauthenticated merchandise? Not much. Most have limited their distribution partnerships in Korea to department stores. Coach and Tommy Hilfiger are the only brands in the L2’s Korea Luxury Index that link to e-tailers, but more such handoffs could emerge as e-tailers up control of listings.